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Data aggregation and connectivity firm Plaid recently announced Exchange, its open finance platform that allows banks and other financial institutions to share their customers’ data via a single API integration. As the public requires more forms of integration with the fintech apps they use, banks are looking for secure solutions. And for banks that may not have the in-house chops to stand up an API, Exchange enables them to get to market cheaper and quicker.
Plaid’s Niko Karvounis joins me on the podcast today. The product lead for Plaid’s institutional products, Niko was also co-founder of Quovo, which Plaid acquired. He shares his vision for Exchange and how financial institutions are moving to service their customers’ needs for connectivity.
Introducing Plaid Exchange
We’re announcing Plaid Exchange, an open finance platform that makes it easy for financial institutions of any size, scale or segment to enable data access and account connectivity on behalf of their customers through an API integration. At the core of Plaid Exchange is an API integration that establishes secure and reliable data connectivity between the institution and Plaid on behalf of our shared customers and users who want to add those accounts to the apps and services they use.
We looked at that API integration as the core pipes of how we can move connectivity to the next level. But then we also stepped back and said building an open finance solution as a financial institution is difficult. They aren’t innately technology companies, and larger and smaller institutions have different sets of resources and infrastructure.
Connectivity and digital finance
One of the things we talk about is a multi-year progression of connectivity becoming a foundational element of digital finance. In this new pandemic, where millions of people are locked at home, digital finance and app usage has skyrocketed. Expectations of people connecting their financial accounts to apps and services they use was happening naturally but now it’s happening in a much more extreme, punctuated way — you literally can’t go to a bank anymore.
It’s an establishment of a new normal — what are the behaviors under these conditions that will last? The same way you expect your bank to have a good website, you now expect your bank to allow you to connect your financial accounts with them to the digital services you need and want for your livelihood and financial wellbeing. That’s being cemented as a core expectation of a digital customer today and in the future.
We’re really serious about accelerating open finance. We believe there should be secure and reliable data flow on behalf of consumers regardless of what institution you’re at or provider you’re using or what your stack looks like. We want institutions from Wall Street to Main Street to be able to provide the same digital experience for consumers.
Exchange was a cross-functional initiative. It has a few moving parts. The first is the API itself. Thinking about how to build an API, the Plaid Exchange API for Data Exchange. The second thing is consumer access. How do we think about giving consumers the tools to connect their accounts and also view and manage the data they want. Where do you want to view all the connections you have? Giving them the privacy and control over their own data. Another thing is platform management. On the financial institution side, where are the tools for them to be active participants in this ecosystem? For example, how do we optimize traffic patterns between apps and FIs?
Lastly, we’re thinking about where there can be products and beneficial features for financial institutions based on a Plaid Exchange integration. Once you’ve set up the API as a data-out infrastructure for your institution, that opens up things on your digital roadmap. For example, the complexity of spending categorization is underappreciated. With Plaid Exchange, because we receive transaction data from the institution, we can actually make that data available back to the institution fully categorized, so they can spin up personal finance dashboards much more efficiently.
We do a ton of internal research on consumer permissioning. We have folks within Plaid who spend a lot of time discussing permissioning directly with consumers to get a feel for how they value it and what they expect. It’s paramount for us. We want to be totally transparent and give people the tools designed to make it clear what people are accessing and managing on these portals. It’s all from the ground up, informed by human beings.
We’re organized internally around these constituencies: consumers, developers and institutions. All of these interact, so we make sure we’re coordinated cross functionally and all the right folks are working together on all these initiatives. I think it’s a testament that shows how committed we are to an open finance ecosystem that’s beneficial to all players.
Getting the word out
We get about 10-20 inbounds a week from banks looking for an API solution. They’re thinking seriously about open finance and how it relates to their institution. A very real part of getting the word out is engaging with people already coming in the door.
We also leverage existing channels. We’ve talked to about 100 banks in building up to Plaid Exchange. We’ve been leveraging that to inform the design of the platform and we keep those conversations going as we launch.
There’s also a word of mouth component, in that this moment is a perfect storm — banks are thinking about this. You’re seeing some banks begin to build their own APIs where in the past, they were reticent about doing that. There’s inbound interest plus consumers are stuck at home, needing account connectivity.